Management's discussion and analysis is included to assist shareholders in understanding the Company's financial condition, results of operations, and cash flow. This discussion should be reviewed in conjunction with the consolidated financial statements (unaudited) and notes included in this report and the supplemental financial data appearing throughout this report. Since the primary asset of the Company is its wholly-owned subsidiary, most of the discussion and analysis relates to the Bank.

Management's Discussion and Analysis of Financial Condition and Results of Operations and other portions of this quarterly report contain certain "forward-looking statements" concerning the future operations of the Bank of South Carolina Corporation. Management desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1996 and is including this statement for the express purpose of availing the Company of protections of such safe harbor with respect to all "forward-looking statements" contained in this Form 10-Q. The Company has used "forward-looking statements" to describe future plans and strategies including its expectations of the Company's future financial results. The following are cautionary statements. Management's ability to predict results or the effect of future plans or strategies is inherently uncertain. A variety of factors may affect the operations, performance, business strategy and results of the Company including, but not limited to the following:

? Risk from changes in economic, monetary policy, and industry conditions ? Changes in interest rates, shape of the yield curve, deposit rates, the net interest margin and funding sources ? Market risk (including net income at risk analysis and economic value of equity risk analysis) and inflation ? Risk inherent in making loans including repayment risks and changes in the value of collateral
? Loan growth, the adequacy of the allowance for loan losses, provisions for loan losses, and the assessment of problem loans ? Level, composition, and re-pricing characteristics of the securities portfolio
? Deposit growth, change in the mix or type of deposit products and services
? Continued availability of senior management ? Technological changes
? Ability to control expenses
? Changes in compensation
? Risks associated with income taxes including potential for adverse adjustments
? Changes in accounting policies and practices ? Changes in regulatory actions, including the potential for adverse adjustments
? Recently enacted or proposed legislation ? Current disarray in the financial service industry.

All forward-looking statements in this report are based on information available to the Company as of the date of this report. Although Management believes that the expectations reflected in the forward-looking statements are reasonable, Management cannot guarantee that these expectations will be achieved. The Company will undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events. In addition, certain statements in future filings by the Company with the SEC, in press releases, and in oral and written statements made by or with the approval of the Company, which are not statements of historical fact, constitute forward looking statements.

Overview
Bank of South Carolina Corporation (the Company) is a financial institution holding company headquartered in Charleston, South Carolina, with $343.7 million in assets as of March 31, 2012 and net income of $890,726 for the three months ended March 31, 2012. The Company offers a broad range of financial services through its wholly-owned subsidiary, The Bank of South Carolina (the Bank). The Bank is a state-chartered commercial bank which operates primarily in the Charleston, Dorchester and Berkeley counties of South Carolina. The Bank's original and current concept is to be a full service financial institution specializing in personal service, responsiveness, and attention to detail to foster long standing relationships.

The following is a discussion of the Company's financial condition as of March 31, 2012 as compared to December 31, 2011 and the results of operations for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011. The discussion and analysis identifies significant factors that have affected the Company's financial position and operating results and should be read in conjunction with the financial statements and the related notes included in this report.

The Company derives most of its income from interest on loans and investments (interest bearing assets). The primary source of funding for making these loans and investments is the Company's interest and non-interest bearing deposits. One of the key measures of the Company's success is the amount of net interest income, or the difference between the income on its interest earning assets, such as loans and investments, and the expense on its interest bearing liabilities, such as deposits. Another key measure is the spread between the yield the Company earns on these interest bearing assets and the rate the Company pays on its interest bearing liabilities.

There are risks inherent in all loans; therefore, the Company maintains an allowance for loan losses to absorb estimated losses on existing loans that may become uncollectible. The Company established and maintains this allowance based on a methodology representing the environment it operates within. For a detailed discussion on the allowance for loan losses see "Provision for Loan Losses".

The Company's results of operations depend not only on the level of its net interest income from loans and investments, but also on its non-interest income and its operating expenses. Net interest income depends upon the volumes, rates and mix associated with interest earning assets and interest bearing liabilities which result in the net interest spread. The Company's net interest spread for the three months ended March 31, 2012 was 3.67% compared to 3.81% for the three months ended March 31, 2011. This decrease in the net interest spread was primarily due to high yielding investment securities maturing and subsequently re-invested at significantly lower rates.

Non-interest income includes fees and other expenses charged to customers. A more detailed discussion of interest income, non-interest income and operating expenses follows.

For three months ended March 31, 2012, the Bank has paid $540,000 to the Company for dividend payments.

CRITICAL ACCOUNTING POLICIES
The Company has adopted various accounting policies that govern the application principles generally accepted in the United States and with general practices within the banking industry in the preparation of its financial statements. The Company's significant accounting policies are described in the footnotes to its unaudited consolidated financial statements as of March 31, 2012 and its notes included in the consolidated financial statements in its 2011 Annual Report on Form 10-K as filed with the SEC.

Certain accounting policies involve significant judgments and assumptions by the Company that have a material impact on the carrying value of certain assets and liabilities. The Company considers these accounting policies to be critical accounting policies. The judgment and assumptions the Company uses are based on historical experience and other factors, which the Company believes to be reasonable under the circumstances. Because of the number of the judgments and assumptions the Company makes, actual results could differ from these judgments and estimates that could have a material impact on the carrying values of its assets and liabilities and its results of operations.

The Company considers its policies regarding the allowance for loan losses to be its most subjective accounting policy due to the significant degree of management judgment. The Company has developed what it believes to be appropriate policies and procedures for assessing the adequacy of the allowance for loan losses, recognizing that this process requires a number of assumptions and estimates with respect to its loan portfolio. The Company's assessments may be impacted in future periods by changes in economic conditions, the impact of regulatory examinations and the discovery of information with respect to borrowers which were not known by management at the time of the issuance of the consolidated financial statements. For additional discussion concerning the Company's allowance for loan losses and related matters, see "Allowance for Loan Losses."

BALANCE SHEET
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include working cash funds, due from banks, interest bearing deposits in other banks, items in process of collection and federal funds sold. In order to improve the Company's yield on daily liquidity, the Company terminated all of its Federal Funds positions and moved the money to the Federal Reserve as the Company was able to earn .25% - approximately ten basis points more than the Company was making on Federal Funds. Therefore there were no Federal Funds sold at March 31, 2012 or December 31, 2011. Total Cash and cash equivalents increased 9.00% or $10,048,631 to $121,664,267 at March 31, 2012, from $111,615,636 at December 31, 2011. This increase is the result of core deposit growth.

Regulations set by the Federal Reserve require the Company to maintain certain average cash reserve balances. At March 31, 2012 and December 31, 2011 the daily average reserve requirement was approximately $700,000.

LOANS
The Company focuses its lending activities on small and middle market businesses, professionals and individuals in its geographic markets. At March 31, 2012, outstanding loans (plus deferred loan fees of $55,603) totaled $212,440,582 which equaled 68.47% of total deposits and 61.81% of total assets. Substantially all loans were to borrowers located in the Company's market areas in the counties of Charleston, Dorchester and Berkeley in South Carolina.

Because lending activities comprise such a significant source of revenue, the Company's main objective is to adhere to sound lending practices. The Loan Committee of the Board of Directors meets monthly to evaluate the adequacy of the Allowance for Loan Losses and to review all loans resulting in credit exposure of $10,000 or more.

The breakdown of total loans by type and the respective percentage of total loans are as follows:

                                                 March 31,                December 31,
                                          2012              2011              2011
Commercial loans                      $  53,042,238     $  50,465,500     $  55,565,525
Commercial real estate:
Commercial real estate construction       3,250,384         4,128,026         3,564,327
Commercial real estate other            106,764,460       101,503,665       106,408,621
Consumer
Consumer real estate                     44,980,357        42,805,491        43,185,861
Consumer other                            4,403,143         5,833,506         4,984,778
                                        212,440,582       204,736,188       213,709,112
Allowance for loan losses                (3,234,514 )      (2,763,745 )      (3,106,884 )

Loans, net                            $ 209,206,068     $ 201,972,443     $ 210,602,228



Percentage of Loans                          March 31,            December 31,
                                         2012         2011            2011
Commercial loans                          24.97 %      24.65 %            26.00 %
Commercial real estate constructions       1.53 %       2.01 %             1.67 %
Commercial real estate other              50.26 %      49.58 %            49.79 %
Consumer real estate                      21.17 %      20.91 %            20.21 %
Consumer other                             2.07 %       2.85 %             2.33 %

Total                                    100.00 %     100.00 %           100.00 %

Although the Company's customers indicate that business conditions are improving, loan demand did not increase during the first quarter of 2012 from year end 2011.

INVESTMENT SECURITIES AVAILABLE FOR SALE
The Company uses the investment securities portfolio for several purposes. It serves as a vehicle to manage interest rate and prepayment risk, to generate interest and dividend income from investment of funds, to provide liquidity to meet funding requirements, and to provide collateral for pledges on public funds. Investments are classified into three categories (1) Held to Maturity (2) Trading and (3) Available for Sale. Management believes that maintaining its securities in the Available for Sale category provides greater flexibility in the management of the overall investment portfolio. The average yield on investments at March 31, 2012 was 2.47% compared to 2.45% at December 31, 2011. The amortized cost of the investments available for sale at March 31, 2012 and December 31, 2011 and percentage of each category to total investments are as follows:

                                 INVESTMENT PORTFOLIO

                                         March 31, 2012       December 31, 2011
      US Treasury Notes                  $     6,261,562     $         6,310,782
      Government-Sponsored Enterprises        18,377,605              18,434,117
      Municipal Securities                    34,107,436              34,807,261
                                         $    58,746,603     $        59,552,160

      US Treasury Note                             10.66 %                 10.60 %
      Government-Sponsored Enterprises             31.28 %                 30.95 %
      Municipal Securities                         58.06 %                 58.45 %
                                                  100.00 %                100.00 %

All investment securities were classified as Available for Sale (debt and equity securities that may be sold under certain conditions), at March 31, 2012 and December 31, 2011. The securities were reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of shareholders' equity, net of income taxes. Unrealized losses on securities due to fluctuations in fair value are recognized when it is determined that an other than temporary decline in value has occurred. Gains or losses on the sale of securities are recognized on a specific identification, trade date basis.

The amortized cost and fair value of investment securities available for sale are summarized as follows as of March 31, 2012 and December 31, 2011:

                                                                 MARCH 31, 2012
                                                           GROSS
                                                        UNREALIZED       GROSS UNREALIZED     ESTIMATED FAIR
                                   AMORTIZED COST          GAINS              LOSSES               VALUE

U.S. Treasury Note                 $     6,139,487     $     122,075     $              -     $     6,261,562
Government-Sponsored Enterprises        18,031,262           346,343                    -          18,377,605
Municipal Securities                    31,634,448         2,473,749                  761          34,107,436

Total                              $    55,805,197     $   2,942,167     $            761     $    58,746,603



                                                              DECEMBER 31, 2011
                                                          GROSS             GROSS
                                                        UNREALIZED        UNREALIZED       ESTIMATED FAIR
                                   AMORTIZED COST         GAINS             LOSSES              VALUE

U.S. Treasury Notes                $     6,153,299     $    157,483     $            -     $     6,310,782
Government-Sponsored Enterprises        18,100,730          333,387                  -          18,434,117
Municipal Securities                    32,101,781        2,706,597              1,117          34,807,261

Total                              $    56,355,810     $  3,197,467     $        1,117     $    59,552,160

The amortized cost and fair value of investment securities available for sale at March 31, 2012, and December 31, 2011, by contractual maturity are as follows:

                                                   ESTIMATED
                                  AMORTIZED           FAIR
                                     COST            VALUE

Due in one year or less          $  4,652,534     $  4,669,047
Due in one year to five years      29,307,226       30,158,951
Due in five years to ten years     12,452,562       13,652,709
Due in ten years and over           9,392,875       10,265,896

Total                            $ 55,805,197     $ 58,746,603

                                                   ESTIMATED
                                  AMORTIZED           FAIR
                                     COST            VALUE

Due in one year or less          $  3,745,464     $  3,752,060
Due in one year to five years      30,306,215       31,159,444
Due in five years to ten years     11,110,227       12,350,591
Due in ten years and over          11,193,904       12,290,065

Total                            $ 56,355,810     $ 59,552,160

The fair value of investment securities available for sale with unrealized losses at March 31, 2012, and December 31, 2011, are as follows:

                                Less than 12 months               12 months or longer                      Total
Description of                 Fair          Unrealized         Fair            Unrealized         Fair          Unrealized
Securities                    Value            Losses           Value             Losses           Value           Losses

U.S. Treasury Notes        $          -     $          -     $         -       $          -     $         -     $          -
Government-Sponsored
Enterprises                           -                -               -                  -               -                -
Municipal Securities            164,239              761               -                  -         164,239              761

                           $    164,239     $        761     $         -       $          -     $   164,239     $        761

                               Less than 12 months               12 months or longer                      Total
Description of                Fair          Unrealized         Fair            Unrealized         Fair          Unrealized
Securities                    Value           Losses           Value             Losses           Value           Losses

U.S. Treasury Notes        $         -     $          -     $         -       $          -     $         -     $          -
Government-Sponsored
Enterprises                          -                -               -                  -               -                -
Municipal Securities           243,884            1,117               -                  -         243,884            1,117

                           $   243,884     $      1,117     $         -       $          -     $   243,884     $      1,117

At March 31, 2012, there were two Municipal Securities with an unrealized loss of $761 as compared to three Municipal Securities with an unrealized loss of $1,117, at December 31, 2011. The unrealized losses on investments were caused by interest rate increase. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company has the ability to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

DEPOSITS
Deposits remain the Company's primary source of funding for loans and investments. Average interest bearing deposits provided funding for 69.38% of average earning assets for the three months ended March 31, 2012, and 71.80% for the twelve months ended December 31, 2011. The Company encounters strong competition from other financial institutions as well as consumer and commercial finance companies, insurance companies and brokerage firms located in the primary service area of the Bank. However, the percentage of funding provided by deposits has remained stable. The breakdown of total deposits by type and the respective percentage of total deposits are as follows:

                                                          March 31,                December 31,
                                                   2012              2011              2011
Non-interest bearing demand                       77,565,884        57,417,806        70,217,614
Interest bearing demand                           61,161,565        54,724,732        64,350,891
Money market accounts                             99,169,593        80,809,316        96,292,414
Certificates of deposit $100,000 and over         40,178,883        45,280,146        38,638,528
Other time deposits                               17,022,278        17,647,120        17,416,840
Other savings deposits                            15,173,063        12,294,734        14,211,228

Total Deposits                                   310,271,266       268,173,854       301,127,515



Percentage of Deposits                            March 31,            December 31,
                                              2012         2011            2011
Non-interest bearing demand                    25.00 %      21.41 %            23.32 %
Interest bearing demand                        19.71 %      20.41 %            21.37 %
Money Market accounts                          31.96 %      30.13 %            31.98 %
Certificates of deposit $100,000 and over      12.95 %      16.88 %            12.83 %
Other time deposits                             5.49 %       6.59 %             5.78 %
Other savings deposits                          4.89 %       4.58 %             4.72 %

Total Deposits                                100.00 %     100.00 %           100.00 %

Deposits have increased 15.70% from March 31, 2011 to March 31, 2012 and 3.04% from December 31, 2011 to March 31, 2012.

On February 7, 2012, the Company was notified by a large depositor, that its funds would be withdrawn by the end of that month. This Company was started in Charleston, SC and was purchased by an out-of-state company in 2007. The deposits remained with The Bank of South Carolina with the understanding these deposits would eventually be moved. At quarter end, these deposits had not been withdrawn; however, the majority, $40.8 million were withdrawn after quarter end leaving $6.8 million on deposit as of the date of this filing.

SHORT-TERM BORROWINGS
The Bank had a demand note through the US Treasury, Tax and Loan system with the Federal Reserve Bank of Richmond. The Bank had the ability to borrow up to $1,000,000 at March 31, 2011 under the arrangement at an interest rate set by the Federal Reserve. The note was secured by Government Sponsored Enterprise Securities with a market value of $1,112,665 at March 31, 2011. The amount outstanding under the note totaled $414,431 at March 31, 2011. The Federal Reserve discontinued this program on December 30, 2011. Electronic tax deposits will no longer be deposited into the Company's TT&L main account balance. At March 31, 2012 and December 31, 2011, the Company had no outstanding federal funds purchased with the option to borrow up to $21,000,000 on short term lines of credit. In March 2012, the Company established a $6 million REPO Line with Morgan Keegan. There have been no borrowings under this agreement. The Company has also established a Borrower-In-Custody arrangement with the Federal Reserve. This arrangement permits the Company to retain possession of loans pledged as collateral to secure advances from the Federal Reserve Discount Window. The Company established this arrangement as an additional source of liquidity. As of March 31, 2012 and December 31, 2011 the Company could borrow up to $61,461,326 and $61,527,194, respectively. There have been no borrowings under this arrangement.

Comparison of Three Months Ended March 31, 2012 to Three Months Ended March 31, 2011
Net income increased $241,358 or 37.17% to $890,726, or basic and diluted earnings per share of $.20 and $.20, respectively, for the three months ended March 31, 2012, from $649,368, or basic and diluted earnings per share of $.14 and $.14, respectively, for the three months ended March 31, 2011. The increase in net income between periods is primarily due to an increase in interest and fees on loans, an increase in mortgage banking income and a decrease in the cost of funds. Average earning assets increased $42.04 million for the three months ended March 31, 2012 as compared to the same period in 2011. Average earning assets were $321.5 million during the three months ended March 31, 2012 as compared to $279.4 million for the three months ended March 31, 2011. Average loans increased $10.8 million or 5.14% to $219.7 million for the three months ended March 31, 2012 as compared to $208.9 million for the three months ended March 31, 2011.

Net Interest Income
Net interest income, the major component of the Company's net income, increased $282,828 or 10.43% to $2,995,594 for the three months ended March 31, 2012, from $2,712,766 for the three months ended March 31, 2011. This increase is primarily due to an increase of $141,403 or 5.40% in interest and fees on loans as well as a decrease of $103,879 in the cost of funds. Average loans increased $10,741,133 or 5.14%. Net interest expense decreased $103,879 or 44.03% to $132,059 for the three months ended March 31, 2012, from $235,938 for the three months ended March 31, 2011. The yield on average deposits decreased from .47% for the three months ended March 31, 2011, to .24% for the three months ended March 31, 2012. Average interest bearing deposits increased $20,842,897 or 10.31% during the same time period. The Company's non-interest bearing demand accounts increased $20,148,078 or 35.09% to $77,565,884 for the three months ended March 31, 2012 from $57,417,806 for the three months ended March 31, 2011. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") includes a provision which requires the Federal Deposit Insurance Corporation (FDIC) to provide unlimited federal deposit insurance for non-interest-bearing demand . . .